Consumer ABS Market Update

Monthly Commentary

Primary

Primary issuance slowed down to $14.1B in June after a previous issuance of $22.8B
in May. Auto and card issuance accounted for 71% of the month’s total

A few highlights:

OneMain issued a $350mm transaction with the senior 5.5yr bond pricing at 260/n. The deal is backed by unsecured consumer loans mostly to subprime borrowers and contains a 5yr revolving period

Navient, an issuer of student loans, priced a $761mm deal with the 1yr, 4yr, 8yr senior bonds pricing at 60dm, 85dm, 138dm respectively. This was their 3rd FFELP transaction of the year

SoFi launched its first unsecured consumer loan deal. The $380mm transaction priced the 2.3yr bond at 238/n. The collateral consists of loans to primarily prime borrowers

Secondary

Secondary trading in consumer ABS was relatively stable during the month with muted reaction to Brexit. FFELP student loans remain range bound as market participants digest the new Moody’s assumptions used for ratings. According
to JPM, total volume was $2.7B which was the lowest monthly total for 2016

Market / Consumer News

Navient amended the maturities on $1.9B of bonds

On June 9, Fitch announced that their new criteria for rating FFELP ABS would be released within 60 days

Moody’s released their methodology for rating FFELP ABS. The rating agency also placed an additional $45B on downgrade watch, bringing the total on downgrade watch to $76B, just under 50% of the FFELP market. According to Moody’s, ratings action will be concluded within 6 months

Lending Club announced that it would increase the interest rate on loans it originates by 55 basis points on average and tighten the underwriting by reducing the debt-to-income ratio to 35% from 40%